How Australia can get on the front foot on open banking

  • By Michael Ewald

Contino’s Michael Ewald assesses how Australia can take advantage of an open data framework by drawing on lessons from India. 

With the looming February 2020 open banking deadline, many Australian banks are scrambling to meet the basic requirements of the consumer data right.

Australia is behind other markets, including the United Kingdom, India and Singapore, on open banking. 

In some of these markets, the roll-out has been plagued with issues, such as the lack of understanding within the UK market of open banking and an apparent inability to make good use of the technology. 

On the other hand, there’s a lot Australia can learn from the open banking successes of markets like India. 

India’s Ministry of Electronics & Information Technology has embraced open banking along with a strong digital transformational push for the financial services sector. 

Initiatives like the Aadhaar Enabled Payment System Services by India Post Payments Bank have resulted in a compound annual growth rate (CAGR) of 12.7 per cent for non-cash transactions. 

It’s not just government backing that’s propelled open banking in India forward--the country’s banks were not troubled about sharing consumer data with one another.

India is a hub for innovation. Home to more than 813 million smartphone users, there is no shortage of a test market. 

This environment gives Indian banks leverage to use third parties to provide more digital services on their behalf. 

All-in-one “super apps” are now amalgamating basic banking services via application programming interfaces (APIs). 

This reduces the banks’ IT spend, as they can leave the pain of mobile and overlay development with third parties. 

Another major open banking differentiator between India and Australia is motive. 

The success of super apps in India is telling: as a nation, we need to get over this scepticism and natural tension between startups and “traditional players” to unlock innovation and propel society forward.

The Indian government is pushing the complete digitisation of banking to reduce the cash or ‘black’ economy. 

Open banking is a lever to attract people to apps to manage accounts and payments electronically, therefore phasing out cash. 

According to the Reserve Bank of India, the total volume of digital transactions increased by 59 per cent during 2018 - 19.

India has also shown the potential benefits of partnering and how it might work. 

Two examples are Truecaller and Paytm. Both are partnering with other industries, for example entertainment and utilities, to enhance users’ experiences. 
In Australia, scepticism clouds partnerships between fintechs and banks. 

The success of super apps in India is telling: as a nation, we need to get over this scepticism and natural tension between startups and “traditional players” to unlock innovation and propel society forward.

Banks are now starting to use their data to gain insights into how they can improve customer engagement and deliver perceived value--an example being Commonwealth Bank’s CommBank app powered by its customer engagement engine. 

BPAY is embracing the partnership model with emerging start-ups such as Sniip. 

CBA has partnered with Beem It and Airtasker to provide better customer experiences. 

With CBA and Airtasker, CBA’s data is being used to validate and verify Airtasker users. 

Partnerships will bring more value faster to the ecosystem--and consumers.

Ultimately, customers have to opt in before fintech-bank partnerships will work. 

Therefore, re-building consumer trust in the financial services ecosystem will be critical to open banking’s success. 

Since the Royal Commission, there has been a massive amount of effort and investment by banks to improve systems and services to claw back that trust. 

Open banking should be viewed in this context.

Will open banking result in better end user experiences, like in India? Will partnerships and collaboration develop between the banks, fintechs and other industries with Australians’ best interests in mind?

Will these new relationships be good enough for us, the end users, to trust again and adopt open banking? We will soon find out.

Michael Ewald is the director of engineering at Contino.